Which of the following leads to an increase in real GDP?
A)a decrease in government spending
B)a decrease in the inflation rate in other countries,relative to the inflation in the United States
C)a decrease in interest rates
D)Households have increasingly pessimistic expectations about future income.

Question

Quizplus · Accepted Answer

A decrease in interest rates will lead to an increase in investment spending and consumption expenditure, which will increase aggregate demand and result in an increase in real GDP.

Answer: B 
 A decrease in the inflation rate in other countries, relative to the inflation in the United States, will increase the competitiveness of U.S. goods on the international market, leading to an increase in exports and greater aggregate demand. This will result in an increase in real GDP.

Answer: A 
 A decrease in government spending will decrease aggregate demand, resulting in a decrease in real GDP.

Answer: D 
 Households having increasingly pessimistic expectations about future income will lead to a decrease in consumption expenditure, which will decrease aggregate demand, resulting in a decrease in real GDP.

Which of the Following Leads to an Increase in Real